canon and the disruptive shift to digital imaging

Christian Sandström holds a PhD from Chalmers University of Technology, Sweden. He writes and speaks about disruptive innovation and technological change.

As we know, the digital revolution has swept through the camera industry over the

last decade.

It has popularized photography in a way that we could never have imagined.

Many camera manufacturers have suffered greatly in

this shift…

Hasselblad was in deep trouble.

Konica left the industry after trying to survive through a

merger with Minolta.

Polaroid is also resting in peace.

And so was Leica.

Agfa went bankrupt in 2005.

Kodak have huge problems.

Contax died.

Bronica died.

When film died, Ilford died.

However, some companies have

prospered from the shift to digital imaging.

So far, Canon is one of the companies that not only survived, but also

increased their dominance with the

shift to digital imaging.

According to the American market

researcher IDC, Canon sold 12.6 million digital

cameras in 2004 and had a market share of

17 percent.

By taking a look at how

Canon handled the shift, we

can learn a lot about how

technological revolutions can

be managed.

Let’s go back to the early days of digital imaging and look at how Canon turned this

threat into an opportunity.

The road to the realm of digital imaging has been long and bumpy, even for Canon.

In 1981, the industry was shaken when SONY launched their Mavica, a

camera that used floppy discs instead of film.

In Japan it was referred to as ’the Mavica shock’. This event put

digital imaging on the roadmap.

Many companies invested in and launched their own

’Mavicas’ during the 1980s.

Canon formed a task force to develop a colour Mavica in 1981. It was launched in 1986. Fujifilm came up with something similar in 1988.

Canon’s RC-701 which was launched in 1986 cost 3000 dollars. Needless to say, at such a price point it did not

reach any massmarkets.

None of the Mavica style cameras lead to

any great success.

The Mavica was simply not the way forward to digital imaging.

But Canon had learnt a lot about digital imaging by

entering at this point.

A lot of internal development had been done and with this competence, it became much easier to follow the advances in the field.

Since the required competence was different, Canon recruited engineers and

managers from electronic companies.

They wanted to do things in-house since it was important to obtain knowledge

and renew the resource base.

Digital imaging was developed in a separate organization that was not subject to the daily

internal competition for resources.

However, Canon was not the leading company in digital imaging in the early 1990s.

At this point, some of the first applications of digital imaging

started to prosper.

Leaf and Kodak among others developed digital backs that could be attached to medium

format cameras.

One of the first digital cameras was a

Kodak/Nikon product, launched in 1991.

These backs could be attached to Hasselblad cameras instead of film.

It looked like this.

Yes, big and bulky.

Canon never entered this segment. It was probably too far away from its core segments.

In 1994, Apple launched the QuickTake camera.

It looked like a pair of binoculars, could store 32 photos and was the

first camera that could be connected to a PC.

The price? 800 dollars.

Thus, while Canon had entered and explored digital imaging at an early point, the company was not very active

in the early 1990s…

It seems that Canon started to invest heavily at exactly the right point…

In 1995 Casio launched the QV10.

This is a landmark event in the history of digital imaging.

It had an image quality of 0,25 Megapixels and required 4 AA batteries.

Not the greatest gadget mankind has invented.

But the concept of having a LCD screen and this design turned out to

be very attractive.

Canon now realized that this was the way forward

to digital imaging and started to invest heavily.

Lagging behind both Casio and Sony, it was

time to catch up.

Canon established a ’Digital Imaging Business Centre’ and allocated more resources to it.

The Japanese firms worked jointly in an industry

association to solve critical technical issues.

Moreover, they made sure that the structure was modular, so that each

individual component could be improved separately.

Instead of fighting battles about standards, each company could instead focus on the

product and reducing R&D costs. This created a healthy competition - each one

differentiated within the defined settings.

The modular, standardized structure also implied that consumer electronics

companies could work on each component.

Memory cards…

Image sensors…

LCD screens…

From 1996 and on, Canon kept launching better and cheaper compact cameras all

the time under the ‘Powershot’ brand.

Each component

was now subject to

rapid improvement.

Once the cameras were good enough and cheap enough…

… The digital avalanche came into motion…

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And Canon was now well positioned to benefit from this huge growth.

Back in 2001-02, virtually all my friends got a compact digital camera as a christmas gift. Everyone started to take, send and share photos now.

At this point, Canon spent a lot of money on marketing, and given that everyone knew the

brand, I guess it had a great impact in the christmas rush…

Canon now got rid of all analogue development and grew their

digital camera business rapidly.

As the performance of digital cameras became better and better, it

was now time to launch more advanced models as well.

The Canon 1D was one of the first true alternative for professional photographers

who wanted digital cameras. It was mortal to many of the old camera firms…

Portrait and wedding photography used to be synonymous with Hasselblad, Contax,

Bronica and Mamiya.

All this changed within only a few years in 2000-2004.

Hasselblad was in deep trouble.

Digital SLR cameras from

Canon and Nikon were

cheaper, lighter and

easier to use than a medium format camera with a digital

back.

Most firms in the medium format segment were now collapsing as consequence of what Canon and

Nikon had launched.

As the sensors, optics and signal processing became better and cheaper, Canon now started to focus more

on a completely new segment – the ’prosumers’.

Prosumers can be regarded as

advanced amateurs with a great interest in

photography that demand more than a

point and shoot camera.

Canon has been very

dominant in this segment

which has grown

rapidly over the last years.

People who did not even own a camera in the

1990s had become

advanced hobby photographers.

Photography has been

popularized in a way that no

one could have

imagined.

SLR Cameras grew at a stunning rate of 150 percent in 2004, mainly since those targeted

people who did not have a ’semi-high-end’ camera before.

By 2005, Canon had become the market leader after six

years of record profits and a fantastic growth.

Unlike all those companies that collapsed in the shift to

digital imaging, Canon mastered the shift and

emerged as the champion of digital imaging.

Why?

1. Canon entered early and explored digital imaging. While

this did not generate any profits, it was absolutely necessary in

order to follow the developments and be able to enter later on.

2. Timing – entering too early is dangerous since you might bet on the wrong horse. Canon invested heavily after the landmark camera from Casio. This turned out to be a

perfect timing.

3. Canon recruited people from electronic companies in order to

renew the competence base.

4. The company separated much of its digital development,

thereby giving it freedom and preventing that the initiative

would be starved of resources.

5. Canon kept searching for and created new market segments.

Compact cameras were often sold to people who had not owned a camera

before and later on the company created the prosumer segment. The

marketing investments seem to have been an important reason why

people chose Canon.

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